©Stuart Miles - freedigitalphotos

©Stuart Miles – freedigitalphotos

Foreclosure victims often think that buying a home after foreclosure is easy, but in reality, it’s nearly impossible! Today, most of the lenders that provided loans for sub-par borrowers are out of business. They provided “creative” loans for someone with less than perfect credit and many of them failed because of it. In order to get a loan, you’ll need to have proof of income and a credit score that’s in the upper 40% of the nation. Of course, there are exceptions to almost every rule, so if you want a loan bad enough, and if you can afford the payment, I am sure there is someone who would give you a loan, but it will be much harder. If you’re not prepared to work with a “loan shark”, then you’ll need to start repairing your credit immediately! Credit repair is not easy and it will be a lot of work, but having good credit will save you thousands of dollars per year. In mortgage payments alone, you could save over $1,000 a month! Once you have bad credit, it’s very hard to dig yourself out of the hole, but if you follow these steps and you’re persistent, it will pay off! Many people need professional help to repair their credit, so don’t be afraid to ask for help when you need it.

Step 1 – Make a financial plan and budget. The first step is to make sure you can afford all your monthly expenses, without making late payments. This is important, because from this point forward, missing payments is not an option.

Step 2 – Find help with past debts. If you can’t afford to move forward making payments on time, then it’s time to consider credit counseling, debt settlement, or bankruptcy. Bankruptcy will effect your credit for the longest period of time, but can give you an immediate fresh start. Credit counseling and debt settlement can eliminate past debts or make them more affordable, but do not leave a permanent scar on your credit report.

Step 3 – Know your current credit score and who is reporting it. There are three major credit reporting agencies, Experian, TransUnion, and Equifax. You will need to order a report from each of these providers. There are many services who provide reports and scores from all three places for a reasonable charge, or you can probably order a copy directly from all three at no charge.

Step 4 – Understand your report. With every report, there will be instructions on how to decipher what it says. You’ll need to know how each agency reports your credit. Make sure you understand how to tell the difference between the negative items on your report and the positive. There are instructions included with every report that will explain this to you in detail.

Step 5 – Correct any mistakes. Once you have all three of your reports, it’s time to get any mistakes corrected. If any information is inaccurate, you’ll need to file a dispute with the reporting agency. You will need to do this for all three agencies, since they are all independent. When you dispute items, if the debt is not verified, it must be removed.

Step 6 – Begin paying everything on time. No matter what has happened in the past, it’s time to start making your payments on time, each and every month. Missing a single payment from this point forward can be devastating. You need to establish a perfect payment record starting today!

Step 7 – Eliminate your debt as much as possible. Paying down your debit will immediately raise your score. Lenders like to see a low debt to available credit ratio, so the more you pay off the better your credit will be. Try to make double payments if possible every month. This will help you get ahead of the game, by paying off more actual debt and not just the interest.

Step 8 – Charge less to your credit. Obviously, paying off your past debt is meaningless, if you continue charging to credit cards and opening new accounts.

Step 9 – Keep all positive accounts open. If you have an old paid off account, don’t close it! These accounts will continue to report positively on your report, even if you don’t use them. Closing them will remove a positive item from your report and may cause your score to drop.

Step 10 – Open new positive accounts. Once you’ve completed the steps above, it should only be a matter of months before you can get approved for credit again. You may need to pay a higher interest rate, but getting a good account that reports to the credit agencies is very important. Use the new account wisely and build your credit by making all the payments on time.

Eventually your have perfect credit again and you’ll qualify for low interest rate credit cards and mortgages. Use your credit wisely and make sure you find help immediately if you feel yourself starting to fall behind again!

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